KCB GROUP PLC INVESTOR PRESENTATION. H1 2018 FINANCIAL RESULTS
MACRO-ECONOMIC HIGHLIGHTS
Macro-Economic Highlights Kenya GDP Growth Rate (%) 5.7% 5.3% 4.7% 4.7% 6.2% Kenya 5.2% 1.0% Q2 2017 Q3 2017 Q4 2017 Q1 2018 2018P 2.3% 1.3% 6.8% 6.1% 6.3% 4.8% 6.7% 5.7% 9.4% 7.1% Agriculture Manufacturing Real Estate Trade Education Transport and storage 5.3% 2.6% Financial and Insurance 8.2% 7.2% 12.5% 12.0% 5.7% 4.7% Construction ICT Health Mining and Quarrying 7.1% 4.5% Q1 2017 growth Q1 2018 growth Source: CBK, WB 3
Macro-Economic Highlights Kenya Inflation 11.70% 9.21% 7.50% 8.04% 4.30% 4.20% 3.90% 4.50% 3.10% 3.90% 3.73% 4.40% 4.00% 2.50% May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Inflation rate Target Upper Target Lower Non Food Non Fuel Sources: CBK, KNBS 4
Macro-Economic Highlights Kenya 103.7 103.1 KShs/USD Exchange Rate 103.2 103.3 103.3 101.4 100.7 101.0 100.7 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Kenya Interest Rate Evolution (%) 13.70 13.69 13.68 13.49 13.49 13.49 10.00 9.50 9.00 8.31 8.20 8.14 8.13 8.09 8.01 8.01 8.04 8.03 8.02 8.00 7.97 7.93 7.68 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Sources: CBK, KNBS 91 day T bill Average lending rates CBR Rate 5
Macro-Economic Highlights Kenya Current Account Balance (% of GDP) -6.7% -5.2% -6.2% -5.4% -10.4% 2014 2015 2016 2017 F 2018 F Kenya 12 Month Private Sector Credit Growth 3.9% 4.3% 1.5% 1.4% 1.6% 1.7% 2.0% 2.7% 2.4% 2.7% 2.1% 2.0% 2.8% Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Source: CBK 6
Macro-Economic Highlights: Regional GDP (%) 9.6 8.5 Inflation 5.4 7.0 6.5 6.9 6.2 4.4 0.1 Uganda Tanzania Rwanda Burundi Ethiopia 5.0% 3.6% 5.7% 6.6% 1.9% 9.6% 2.5% 9.7% 7.9% 14.0% 52.8% 1.7% 480.0% 182.2% Tanzania Uganda Rwanda Burundi Ethiopia South Sudan 2015 2016 (7.1) 2017 2016 2017 Q1 2018 Q2 2018 14.0% 91 Day T-Bills 15.0% 15.0% Exchange Rates to USD 3491 3752 9.0% 9.0% 7.1% 5.3% 3.6% 2.0% Tanzania Uganda Rwanda Burundi South Sudan 2016 2017 Q1 2018 Q2 2018 2207 2258 1778 1643 828 856 23 27 111 133 Tanzania Uganda Rwanda Burundi Ethiopia* South Q22017 FY2017 Q1 2018 Q2 2018 Sudan Sources: IMF, Bloomberg 7
2018 HIGHLIGHTS
Overview of the year to date Finance Bill: Interest rate cap repeal Debate of the financial market conduct authority Robin hood tax Political Climate: Goodwill from the Handshakes Kenya South Sudan Economic drivers: Big Four Housing Healthcare Manufacturing Food security Record growth in diaspora remittances, tourism, horticulture key to stability of the shilling Adoption of IFRS9 Impact on capital ratios Grace period provided by the Central bank of Kenya Impact on the loan book and provisions 9
Awards and recognition B+ B+ B+ Best Practice in Sustainable Finance Best Retail Bank in East Africa 10
KCB Foundation Interventions Provision of assistive devises and learning material to 47 students living with disabilities Scholarship offering to 47 students living with disabilities in partnership with the Kenya Institute of Special Education & MPESA Foundation Academy Over 5,500 beneficiaries in groups and individuals have accessed business development support Loans valued at over KShs 70 million have been disbursed to over 326 entities 11
KCB Foundation Interventions Livestock value chain in Dairy, Meat, Honey and Fish. Loans of over KShs 100M to 34 Co-operatives RFID tagging for over 39,000 for livestock identification and traceability 45% increased milk production Over 1,500 secondary student scholarships countrywide since 2005 Secondary education fees, stipend and allowance to 240 students Training of youth in a 3- month innovative hydroponics farming initiative mainly producing leafy vegetables, tomatoes, strawberries and livestock fodder among other food crops. 12
OUR CHANNEL CONTRIBUTION
87% of transactions performed outside the branch JUNE 2017 JUNE 2018 ATMs 13% Branch Teller 17% Agency, Internet and POS 25% ATMs 12% Branch Teller 13% Agency, Internet and POS 33% Mobile 45% Mobile 42% Avg. Transactions / Teller per day 88.0 Number of Branch Transactions (M) (14%) (15%) 10.0 75.4 8.5 HY 2017 H1 2018 HY 2017 H1 2018 14
Agency banking: 84% growth in volumes Volume of Transactions (KSHs. B) 101 No. of transactions (M) 16.3 Ave.Trns'/Agent p.d) 6.2 6.4 25 49 55 4.6 7.8 10.2 3.8 4.0 Q1 17 Q1 18 H1 17 H1 18 Q1 17 Q1 18 H1 17 H1 18 Q1 17 Q1 18 H1 17 H1 18 61.7% 58.0% Agency Transaction type 16.8% 14.8% 13.7% 14.0% 8.7% 8.2% 1.8% 0.9% 0.9% 0.4% CASH Deposit CASH Withdrawal School Fees Balance Enquiry Bill Payment *Others H1 2017 H1 2018 *Others: Account opening, mini statement, load cards and Funds transfer 15
Mobile banking: 34% growth in volumes 55 Volume of Transactions (KShs. B) 75 116 156 Number of Transactions (M) 25.7 26.6 10.9 8.3 7.7 Av. Transaction/ active customer/mobile 6.2 6.9 6.3 Q1 17 Q1 18 H1 17 H1 18 Q1 17 Q1 18 H1 17 H1 18 Q1 17 Q1 18 H1 17 H1 18 56.5% 49.7% Mobile Transaction Types 31.6% 22.4% 19.3% 16.7% 1.8% 1.9% B2C B2B C2B LIPA KARO Jun-17 Jun-18 16
10% growth in the average value per POS transaction Volume of Transactions (KShs B) 22 24 POS Revenue 451 470 11 12 214 230 Q1 17 Q1 18 H1 17 H1 18 Q1 17 Q1 18 H1 17 H1 18 17
4% growth in ATM volumes Performance Volume of Transactions (KShs. B) 74 77 Ave.Trns'/ATM p.m Number of Transactions (M) 7.4 7.7 36 39 3.3 3.3 3.3 3.4 3.7 3.7 Q1 17 Q1 18 H1 17 H1 18 Q1 17 Q1 18 H1 17 H1 18 Q1 17 Q1 18 H1 17 H1 18 18
Channel Development Branches 226 238 15% 1% 242 255 260 258 263 263 167 176 179 190 194 198 203 203 59 62 63 65 66 60 60 60 2012 2013 2014 2015 2016 Jun-17 2017 Jun-18 Kenya Intl. Businesses Group 419 342 ATMs 443 455 460 461 453 441 360 366 370 374 374 373 2013 2014 2015 2016 H1 2017 2017 H1 2018 6,085 6,085 16,678 15,246 15,082 13,258 11,948 10,102 9,958 Agents 14,832 16,172 14,668 11,784 12,883 2013 2014 2015 2016 H1 2017 2017 H1 2018 Merchant/POS 6,476 5,839 4,460 4,760 3,280 6,000 5,531 1,805 2,050 4,200 4,605 3,165 1,805 2,050 2013 2014 2015 2016 H1 2017 2017 H1 2018 Kenya Group Kenya Group Kenya Group 19
Over KShs 1.4B in revenue from non-branch channels KShs: M 27 192 199 45 193 239 451 470 438 470 H1 2017 H1 2018 Mobile Merchant POS Agency ATMs Internet 20
Non-Funded Income Mix KShs: M 11,269 11,488 11,481 10,389 2,411 10,400 1,633 1,881 2,500 2,220 1,163 2,014 1,350 2,351 1,576 1,294 2,645 2,824 2,051 1,294 4,506 5,494 5,179 5,159 5,482 Q2 14 Q2 15 Q2 16 Q2 17 Q2 18 Other Fees & Commission Lending Fees Exchange Income Other Income 21
OUR FINANCIALS
Total Assets growth of 6% despite impact of IFRS 9 KCB Group KCB Bank Kenya Net Loans and advances Net Loans and advances up 4% up 3% KShs: 421B Group Asset Portfolio up 6% KShs: 668B Fixed and other Assets up 40% Investment in Govt. Securities down 3% KShs: 113B Cash and Balances with Central Bank and other Financial Institutions Up 17% KShs: 87B KShs: 387B KCB Bank Kenya Asset Portfolio up 8% KShs: 583B Fixed and other Assets up 49% Investment in Govt. Securities down 5% KShs: 97B Cash and Balances with Central Bank and other Financial Institutions up 58% KShs:60B KShs: 47B KShs: 39B 23
Diversified loan portfolio Sectoral loan book comparison 0.5% 0.3% Mining and Quarrying 3.7% 2.9% Agriculture 5.2% 3.4% Energy and water 2.5% 3.3% Tourism, restaurants and hotels 7.7% 4.6% Transport and communication 3.3% 5.7% Financial Services 19.1% 8.4% Trade 4.6% 8.3% Building and construction 12.6% 10.7% Manufacturing 15.8% 17.8% Real estate 25.1% Industry Dec 2017 KCB Jun 18 35.2% Personal/Household * Group gross loans KShs.B 14 13 2 449 18% LCY FCY 419 82% Jun-17 Retail Corporate Mortgage Jun-18 24
NPL Migration and Concentration 9.8% 8.5% 7.9% 7.9% 8.0% 8.4% 8% 92% 1.0% 1.0% 1.0% 1.5% 0.6% 0.4% Q1 2017 Q2 2017 Q3 2017 2017 Q1 2018 Q2 2018 CoR NPL Group LCY FCY 14.8% 16.4% 15.5% 16.3% 15.2% 10.4% 11.0% 11.6% 7.3% 7.8% 7.4% 7.8% 3.2% 3.3% 3.2% 3.2% CHECK OFF MORTGAGE CORPORATE SME & MICRO Q3 2017 Q4 2017 Q1 2018 Q2 2018 25
Good Improvement in coverage 50,000 100.0% 45,000 40,000 35,000 30,000 68.6% 71.8% 69.2% 75.4% 32,978 33,249 56.9% 43,775 75.0% 37,628 61.0% 72.6% 80.0% 60.0% 25,000 20,000 15,000 21,721 44.0% 24,183 45.7% 33.9% 37.5% 40.0% 10,000 20.0% 5,000 - Q2 14 Q2 15 Q2 16 Q2 17 Q1 18 Q2 18 Gross NPL CBK Coverage Ratio IFRS Coverage Ratio 0.0% 26
Healthy funding from deposits KCB Group KCB Bank Kenya Deposits up 9% Deposits up 11% KShs: 525 Group Liabilities and Equity up 6% KShs: 668B Balances to banks and Debt Down 9% KShs: 29B Equity up 1% KShs: 470B KCB Bank Kenya Liabilities and Equity up 8% KShs: 583B Balances to banks and Debt down 14% KShs: 17B Equity up 1% KShs: 99B KShs: 83B Other Liabilities down 16% Other Liabilities down 13% KShs: 15B KShs: 12B 27
Balanced deposit mix 2% 3% 3% 2% 55% 47% 46% 46% 42% 50% 51% 52% 2015 2016 2017 H1 2018 Corporate Retail Other Currency Mix Deposits by Type H1 2017 Deposits by Type H1 2018 7% 6% 11% 22% 26% 89% 5% 66% 5% 63% LCY FCY Demand Savings Term Call 28
Strong capital position Group 17.4% Core Capital to RWA 15.4% 15.1% 15.7% Group 18.7% Total Capital to RWA 16.6% 15.3% 17.2% 14.5% 14.5% 14.5% 14.5% 10.5% 10.5% 10.5% 10.5% Kenya H1 2017 2017 Q1 2018 H1 2018 14.3% 14.9% 15.0% 14.8% 10.5% 10.5% 10.5% 10.5% Kenya H1 2017 2017 Q1 2018 H1 2018 17.2% 16.1% 16.4% 15.0% 14.5% 14.5% 14.5% 14.5% H1 2017 2017 Q1 2018 H1 2018 H1 2017 2017 Q1 2018 H1 2018 29
Resolute strategy delivers 6% balance sheet growth KShs Billions Actual H1 2017 KCB Group Actual H1 2018 Y-O-Y Change KCB Bank Kenya Actual Actual H1 2017 H1 2018 Y-O-Y Change Cash and balances with central bank 29.9 37.3 25% 25.3 34.7 37% Balances with other institutions 44.7 49.8 11% 12.7 25.4 100% Investments in Government & Other securities 115.8 112.5 (3%) 101.8 96.8 (5%) Net loans and advances 407.0 421.5 4% 373.8 386.6 3% Fixed assets 9.6 10.5 9% 6.1 7.4 22% Other assets 23.6 36.0 53% 20.3 31.9 57% Total Assets 630.6 667.7 6% 540.0 582.7 8% Customer Deposits 482.8 524.9 9% 423.7 470.3 11% Balances due to other banks 15.4 8.6 (44%) 8.2 0.3 (97%) Other liabilities 17.3 14.5 (16%) 13.7 11.9 (13%) Long-term debt 16.7 20.7 24% 12.0 17.1 43% Total Liabilities 532.3 568.7 7% 457.6 499.5 9% Shareholders Equity 85.7 98.1 14% 70.8 83.2 17% Statutory loan loss reserve 12.6 0.9 (93%) 11.6 - (100%) Total Liabilities and Equity 630.6 667.7 6% 540.0 582.7 8% 30
18% Growth in Earnings KCB Group KCB Bank Kenya KShs Billions Actual H1 2017 Actual H1 2018 Y-O-Y Change Actual H1 2017 Actual H1 2018 Y-O-Y Change Interest Income 30.4 32.2 6% 27.2 28.9 6% Interest Expense (7.2) (8.1) 12% (6.0) (6.9) 16% Net interest income 23.1 24.1 4% 21.2 21.9 3% Foreign exchange income 2.6 2.8 7% 1.5 1.3 (16%) Net fees and commissions 7.2 6.8 (6%) 5.3 5.4 2% Other income 1.6 1.9 15% 1.0 1.7 64% Total other operating income 11.5 11.5 0% 7.9 8.4 6% Total other operating expenses (17.9) (17.7) (1%) (13.7) (13.8) 0% Provisions for bad debts (2.0) (0.8) (59%) (1.6) (0.7) (55%) Profit before tax 14.8 17.1 16% 13.8 15.8 15% Tax (4.5) (5.0) 11% (4.1) (4.7) 13% Profit after tax 10.3 12.1 18% 9.6 11.1 16% 31
25% growth in International Business PBT KShs. M Net loans & Advances PBT KCB Bank South Sudan 317 246 224 100 (68%) KCB Bank Burundi KCB Bank Uganda KCB Bank Rwanda 1,797 6,475 11,707 1,918 5,610 12,505 33 100 107 283 247 310 203% 164% 25% 5% growth in Total Subsidiary Net loans and Advances KCB Bank Tanzania H1 2017 H1 2018 12,964 14,650 226 371 64% 32
Overview of Key Financial Ratios Q2 17 FY17 Q1 18 KENYA GROUP 23.6% 19.5% 20.2% Return on Average Equity 26.1% 23.5% 51.8% 46.2% 48.3% Cost to Income 45.4% 48.2% 7.8% 8.5% 9.8% Gross NPL to Gross Loans 8.5% 8.4% 75.4% 75.4% 56.9% NPL Coverage 72.9% 75.0% 14.5% 14.0% 22.6% Debt to Equity 20.6% 20.9% 33.5% 32.2% 32.7% Non funded income to total income 27.7% 32.3% 2.9% 3.0% 3.2% Cost of funds 3.0% 3.0% 8.4% 8.9% 8.2% Net Interest Margin 8.4% 8.3% 1.0% 1.5% 0.6% Cost of risk 0.4% 0.4% 86.9% 85.1% 84.3% Loan to Deposit Ratio 87.7% 85.5% 19% 10% 6% Growth of Net Loans and Advances 7% 4% 16% 11% 9% Growth of Customer Deposits 11% 9% 33
Interim Dividend Following these results, the Board of Directors approved payment of an interim dividend of KShs: 1.00 per share. The dividend will be paid on or about Friday, 30 November, 2018, to shareholders registered at the close of business on Monday 3 September, 2018. 34
Thank you. Investor Relations Email: investorrelations@kcbgroup.com www.kcbgroup.com